It's a uniquely positive environment right now for risk assets, says UBS' Evan Brown
Speakers
Evan Brown
— Guest, UBS Asset Management
Summary
Evan Brown of UBS Asset Management says fiscal spending in the US, Germany, and Japan plus falling inflation create a uniquely positive environment for risk assets. He advises diversifying beyond Mag 7 into cyclicals, financials, industrials, and small caps, and favors global financials, especially European and Japanese banks. He is overweight government bonds as an inflation and labor-market hedge, warns of AI capex ROI risk, and sees a potential Supreme Court tariff strike-down as bullish for the market.
- UBS's Evan Brown sees a positive risk-asset backdrop from fiscal spending and disinflation.
- He recommends diversifying beyond Mag 7 into cyclicals, financials, industrials, and small caps.
- He favors global financials, especially European and Japanese banks.
- He is overweight government bonds as a hedge against labor-market weakness.
- He flags AI capex ROI uncertainty and a potential DeepSeek-style tech disappointment.
- He says a Supreme Court move to strike down tariffs could be bullish for the US market.
- He expects inflation to fall toward 2% outside tariffs, with one-year inflation swaps easing.
Ideas
Diversify beyond Mag 7 into cyclicals
Investors are already very concentrated through major indexes and few need to add Mag 7 exposure; with a supportive environment, he advises diversifying beyond Mag 7 into cyclicals, financials, industrials, and small caps.
Global banks cheaper, have room to run
US financials are trending at all-time highs and should not be fought, but global financials are much cheaper; European and Japanese banks have been beaten down for years, are showing strength, and have room to run.
Overweight government bonds as labor hedge
He is overweight government bonds because inflation is coming down and bonds provide a hedge if the labor market disappoints as unemployment rises.
AI capex ROI risk in Big Tech
A key risk is the uncertain ROI on AI capex; another DeepSeek-style disappointment in tech would not surprise him, which is why he advises diversifying beyond Big Tech.
Tariff strike-down bullish for market
If the Supreme Court strikes down some tariffs, it would be bullish for the market because the administration may not be able to reimpose roughly 90% immediately and may not rush to do so before the midterms given affordability politics.
